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QUESTION:
The following graph plots the market for pizzas in Chicago, where you can assume there are always over 1,000 pizzerias. Suppose an innovation in the baking process makes it possible to produce more pizzas at a lower cost than ever before.
Show the effect of this change on the market for pizzas by shifting one or both of the curves on the following graph, holding all else constant.
Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther.

ANSWER:

Show the effect of this change on the market for pizzas by shifting one or both of the curves on the following graph, holding all else constant.
Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther.
Points:
1 / 1
Close Explanation
Explanation:
The innovation in the baking process lowers the cost of producing pizzas. Therefore, for any given price of a pizza, sellers are willing and able to supply more pizzas. Visually, this is seen as a rightward shift of the supply curve.
Note that the demand curve does not shift, because none of the factors affecting demand have changed. In particular, the demand curve shifts in response to changes in any of the following:
Factors Affecting Demand
Price of a related good (complement or substitute)
Income of consumers
Tastes of consumers
Number of consumers
Expectations of consumers

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